The small and the beautiful

They aren’t the best subjects for photoshoots—operating from industrial estates, making things like overhead cranes and with brands that lie buried under the hood of your latest Maruti A-Star. In a world preoccupied with bigness, even their classification tries to put them in their place: Small & Medium Enterprises (SMEs).

Their promoters shun the limelight, instead wrestling for payments from corporate giants (often their main customers), driving up from their kutcha roads to negotiate with banks or with their excise officer. But they are also stars of India’s irrepressible entrepreneurial spirit, sheer numbers making up for individual size.

SMEs—over 13 million of them, employing 42-million plus people—account for nearly half of India’s manufacturing output and 40 per cent of exports. Take away the SMEs and you could be dead right now if you are reading this in your chauffeured car (some SME made the steering wheel, rear view mirror, the fuel injection system and the seat itself).

So Business Today decided to do what we are best at: turning the spotlight on talent, and listing them. What if SMEs are not hot in B-School placements or if prospective fathers-in-law sneer at them! BT decided to highlight not just the individuals behind the SMEs but also tell their success stories, put a face on them.

The numbers, as we said, were daunting and their anonymity more so, but we decided to make a start. After all, with the world in a recession, the giants of yesterday are laying off people and cutting costs. What better time to activate the budding entrepreneur who had lost himself in the clockwork of a 10 to 5 job and now finds himself jobless?

So we—along with our partners (see methodology)—trawled through hundreds of SMEs, kept shortlisting and then picked out those we felt had the best success stories or most unusual ones. From this also, we picked category winners.

There’s another reason for this focus on SMEs: the slowdown that has battered India Inc. since last year has not left SMEs unscathed. If at all, their plight is worse: many of them had to down shutters or lay off workers by the hundreds, even as they were operating on thin margins.

As Surinder Kapur of Sona Group, which started off as an SME supplier to Maruti and has grown to a turnover of Rs 3,650 crore, told BT: “SMEs operate in a very competitive environment and the larger companies don’t exactly help matters through their multiple sourcing deals—so in terms of funding, SMEs are on a very tight leash.”

The lack of financial muscle has hurt the SME sector more. “Bigger companies have far more clout in the markets they operate in and also with the banking and financial institutions to cushion the impact. Not so with the SMEs,” says Salil Singhal, Chairman, National MSME Council of the Confederation of Indian Industry. But, as Kapoor says, the slowdown is not without its opportunities: use of IT could improve efficiencies and their size gives them flexibility.

THE JURY

Dinesh Rai Secretary, Ministry of Micro, Small and Medium Enterprises “There ought to be a greater correlation between star SMEs and star SME CEOs than is reflected in the methodology”

S. Sandilya Chairman, Eicher Group “In India, people who win awards are not necessarily expected to share their knowledge with others”

Rana Kapoor Founder, Managing Director and CEO, YES Bank “The awards cover issues like governance, corporate social responsibility, and innovation - categories not commonly recognised in the SME sector”

Parag Patki CEO, SME Rating Agency of India “Innovation is in every field. But here the focus has been product innovation”

Anil Bhardwaj Secretary General, Federation of Indian Micro, Small and Medium Enterprises “The Star CEO category needs to take into account more factors than have been considered this year”

The Methodology

Cricket matches are easy—selecting winners for the very first Business Today-YES Bank SME Awards required more brainstorming than devising a corporate strategy.

From a universe of 30,000—to whom the first lot of questionnaires were sent seeking preliminary details of the company—876 applications were received across 34 sectors and six award categories. Given the eligibility criteria of a turnover range not below Rs 20 crore and not exceeding Rs 150 crore, the list of eligible applicants was whittled down to 831.

That was the stage when the first level short-listing criteria kicked in, with different criteria created for each category by Business Today-YES Bank, which was very specific to the categories. The number of applicants was now down to 68. Following this process, each of these categories was checked to ensure that there was enough information to analyse them further.

Wherever more information was required, which was to be received from the companies and had not been disclosed at the initial stage of the application form, regional heads from YES Bank actually interviewed the key person at these companies. On the basis of this additional information, the 68 applicants were brought down to 30.

These final 30, divided into six categories of five nominees each, were then circulated to the jury members in the form of a docket containing essential information on each nominee. It may be mentioned here that about 10 to 15 per cent of the entries of the last 68 applicants were weeded for not furnishing the additional information that was required; in a large case it was financial information.

The entire process—from sending out questionnaires to the final 30 nominees— was spread over a period of three months, starting from March 2009 and it was advertised through Living Media India’s group publications, including India Today and Business Today as also leading newspapers.

The jury comprised eminent names from the field of industry and government —including S. Sandilya, Chairman, Eicher Group, Rana Kapoor, Founder, Managing Director and CEO, YES Bank, Dinesh Rai, Secretary, Ministry of Micro, Small and Medium Enterprises, Parag Patki, CEO, SME Rating Agency of India and Anil Bhardwaj, Secretary General, Federation of Indian Micro, Small and Medium Enterprises (FISME). The entire process—staring from the sending out of questionnaires to the jury meeting—was validated by Grant Thornton.

STEP BY STEP

1. Award conceptualisation
The endeavour is to recognise the emerging stars of tomorrow, based on their performance, best practices and innovations.

2. Develop questionnaire
Sent out to companies to be filled and returned for first-level short listing.

3. Interaction with shortlisted companies
Design-specific questionnaires for each category and follow up for completion within predetermined timelines.

4. Identify nominees
Based on performance and ranking parameters.

5. Jury meeting
Prepare jury docket and circulate in advance to all jury members for the final meeting to select winners in each category.